Nifty to head to 5,650 subject to dips
The Nifty closed in the positive for the seventh day in a row and the Sensex finished higher for the fifth straight day on positive developments in Europe and across-the-board buying by foreign institutional investors. Both benchmarks closed at their highest levels in nearly two months. We had said yesterday that if the index closes above 5,560, the up-move will gain more strength to reach up to 5,650. The Nifty traded above 5,560 for the entire session. The index has to stay above 5,608 to keep the momentum going.
The Nifty opened 22 points higher at 5,567 and the Sensex started the day at 18,552, up 60 points from its previous close. The day's opening figures were also the intra-day lows today. Metal, power, IT, technology and fast moving consumer goods counters witnessed good buying in early trade.
The market continued its northward journey in subsequent trade, on all-round buying support, amid some choppiness. Gains in post-noon trade were also boosted by a firming up in the key European bourses, which opened in the green on confidence that Greece will be able to avoid a default on its debt. All sectoral indices were positive.
The indices touched their intra-day highs at around 2.30pm, with the Nifty adding 64 points to 5,609 and the Sensex climbing 223 points to touch 18,715. Finally, the Nifty finished 55 points higher at 5,600 and the Sensex jumped 201 points to close at 18,694. The closing on both the Nifty and the Sensex are the highest since 3rd May.
The advance-decline ratio on the National Stock Exchange was 1121:590.
Among the broader markets, the BSE Mid-cap index gained 0.78% and the BSE Small-cap index advanced 0.95%.
All sectoral gauges settled in the positive, with the BSE Fast Moving Consumer Goods index (up 2.58%) emerging as the top gainer. It was followed by BSE Metal (up 1.52%), BSE Bankex (up 0.96%), BSE Power (up 0.95%) and BSE IT (up 0.75%).
In the Sensex space, Sterlite Industries (up 3.45%), ITC (up 2.79%), Hindustan Unilever (up 2.72%), HDFC Bank (up 2.65%) and Reliance Infrastructure (up 2.38%) were the major gainers. ONGC (down 2.13%), Bajaj Auto (down 1.32%), Jaiprakash Associates (down 1.20%), DLF (down 0.31%) and Mahindra & Mahindra (down 0.27%) were the laggards on the index.
The main Nifty gainers were IDFC (up 3.64%), Sterlite Industries (up 3.63%), HUL (up 3.38%), ITC (up 3.15%) and Ranbaxy (up 3.03%). The top Nifty losers were ONGC (down 2.21%), Reliance Power (down 1.39%), JP Associates (down 0.95%), GAIL India (down 0.93%) and BPCL (down 0.88%).
Most markets in Asia closed in the green on optimism that the developments in Europe would help export-oriented nations in the region. Besides, the announcement that industrial output in Japan rose 5.7% in May was above analysts' expectations of a 5.5% increase and a 1.6% gain in April. It was the second-biggest increase on record after a 7.9% rise in March 1953.
The KLSE Composite gained 0.32%, the Nikkei 225 jumped 1.54%, the Straits Times rose 0.95%, the Seoul Composite climbed 1.53% and the Taiwan Weighted advanced 1.11%. On the other hand, the Shanghai Composite tumbled 1.11% and the Hang Seng settled flat, down 0.60 points.
Back home, foreign institutional investors were net buyers of stocks worth Rs819.41 crore on Tuesday. On the other hand, domestic institutional investors were net sellers of shares worth Rs575.06 crore.
The Supreme Court today directed the West Bengal government not to go ahead with distribution and return of land in Singur to farmers which was acquired for Tata Motors' small car project Nano.
The bench said it was passing a limited interim order and asked the high court to proceed with the main matter in which the Tatas have challenged the new law enacted by the Mamata Banerjee government for taking possession of land and distributing it to farmers who were the original owners.
Tata Motors gained 1.48% to Rs997.80 apiece on the Bombay Stock Exchange.
The RBI and the ministries have already stepped up their investigations against the MLM company
It seems that pressure is mounting on the government to tighten the noose around the dubious multi-level marketing (MLM) company Speak Asia online Pte Ltd. The Reserve Bank of India (RBI) and the Income-Tax (I-T) department have already initiated investigation against Speak Asia and bank accounts of the company's franchisees have been frozen.
Sources have confirmed that the Reserve Bank of India (RBI) is investigating the operations of the online survey company, which was promising Rs500 a week for just filing online surveys. The investigation would mainly look into financial irregularities, money collection and remittances abroad. Meanwhile, other pyramid schemes are also making headlines with regularity.
Recently, the Prime Minister's Office (PMO) forwarded the complaints filed by Kirit Somaiya, former member of parliament (MP) and national secretary of the Bhartiya Janata Party (BJP) along with the complaints of party MPs Prakash Javdekar and Hansraj Ahir, to the home secretary, finance secretary and ministry of corporate affairs (MCA). In a release, Mr Somaiya said the MCA and the Securities and Exchange Board of India (SEBI) have intimated him that they have started an inquiry and investigation into the functioning of Speak Asia.
Moneylife and its affiliate Moneylife Foundation, a not-for-profit organisation which promotes financial literacy, had sent a representation, dated 17 May 2011, to the prime minister, urging him to completely ban MLM companies in India or to bring them under the regulation of either the RBI or SEBI. We also requested urgent intervention to investigate Speak Asia for the ambiguities prevailing over its business model and source of funding. (http://foundation.moneylife.in/promotion/speakasia/index.html)
Moneylife columnist Veeresh Malik also filed a Right to Information (RTI) query on 14th June with the PMO, seeking to know the action taken on the representation sent by Moneylife.
The ministry of corporate affairs had earlier said that it would not take any action against the survey company. "Speak Asia is not registered in India so we cannot initiate any investigation against it. MCA does not have any database of the company," corporate affairs secretary DK Mittal had told media persons.
Experts point out that since the PMO has also forwarded the complaints to the ministry of corporate affairs, it remains to be seen what action the ministry will take, as they had earlier shown their inability to initiate any investigation.
Even as SEBI’s move to get investors to buy mutual funds through the stock exchanges has failed to work, fund companies are floating fund-of-funds to funnel money into ETFs—which are supposed to be bought only on the stock exchanges!
In late 2009, the Securities and Exchange Board of India (SEBI) hastily cobbled up the idea that mutual funds can be easily sold through stockbrokers, with fund units getting lodged in demat accounts. But the idea of getting investors to buy mutual funds through the broker-demat route has turned out to be a damp squib.
After one-and-a-half years, retail investors are not buying mutual funds from stock brokers in any meaningful numbers. What about the one kind of fund that must always be bought from stock brokers: exchange-traded funds (ETFs)? These are traded on the exchanges like stocks, hence the name. But fund companies are unable to sell enough of ETFs either. This is of course because hardly anybody buys funds from stockbrokers—exactly the opposite of SEBI's premise. So, even though there are 1.17 crore demat accounts, in a supreme irony, fund companies are now launching a vehicle that would funnel money into ETFs from those who don't have a demat account! The fund companies are arguing that this is being done to widen the market.
But widening what, really, when the ETFs themselves are not selling that well? Since the core objective of garnering money into ETFs itself is not working, the fund companies feel that there is a need to offer schemes to attract money that would then be put into ETFs. This makes nonsense of not only ETFs but SEBI's basic premise that mutual funds would be eagerly bought from stockbrokers.
Reliance was the first to offer the option of investing in ETFs without a demat account for its Gold Savings scheme. The idea was that those who were not able to invest in mutual funds since they did not have a demat account can now participate by investing in the markets through mutual funds. What Reliance had essentially done was converted an ETF into a mutual fund product. After Reliance, Kotak, Quantum, Religare and HDFC also launched a fund-of-fund (FoF) kind of scheme for gold.
Now, Motilal Oswal has also come out with a similar concept-Motilal Oswal MOSt Share NASDAQ 100 FoF. The only job of this FoF is to invest in units of Motilal Oswal MOSt Share NASDAQ 100 ETF. But why launch a scheme only to invest in another scheme which is merely tracking a foreign index? Because MOSt Share NASDAQ 100 ETF will be useless to those who don't have a demat account.
We will wait to see whether the convoluted idea of launching FoFs to funnel money into ETFs manages to get any traction. There is a fundamental contradiction here. Fund companies obviously think that India has a large number of eager investors, but only a small fraction of them have demat accounts. But a fact that the regulator, exchanges and market-infrastructure companies are unable to come to terms with is that India's investor population is not expanding. Those who do not even have a demat account don't even know about the risks of equity or are risk-averse enough not to dabble in equity shares. Most investors like them have preferred a safe investment, such as fixed deposits. The 40-odd funds operating in India have not been able to give achieve much of penetration.
In other words, one can't assume that there are large numbers of eager investors but they don't have a demat account. If they don't yet have a demat account, it means that they simply don't want to invest in markets. To sell FoFs only as a vehicle to funnel money from those who are currently non-investors in ETFs and that too into equity ETFs addresses a need that does not exist. At least, Reliance Gold ETF was a novel idea. It was the first FoF to invest in ETFs and the underlying product was gold, which Indians can relate to. But for those who don't even have a demat account, it would be a blind leap of faith to put money into NASDAQ 100, of all things. And if at all these people want to become investors they would rather prefer to start investing in domestic equity funds rather than plunging directly into foreign funds.
Fund companies and regulators don't see eye to eye on most things. In other things, they are on the same side: they are both focused on the destination, not the road.
Neither of them see that if people (investors) are not taking the current road to the destination (market), building another road to reach the same destination makes little sense.